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December 2015 Stocks and Commodities Traders Tips


Trading the Loonie

AIQ Version:

Original article by Markos Katsanos
AIQ Code by Richard Denning

The code provided contains both the divergence indicator and a long only trading system for the NASDAQ 100 list of stocks. Rather than trading FOREX, I wanted to try the divergence idea and the author’s entry rules on the NASDAQ 100 stocks. The stocks are traded long using the author’s entry rules with two of the parameters adjusted as shown at the top of the code file. The exit has been changed completely to use a profit protect (protect 50% of profits once a 20% profit is reached), a stop loss (protect 75% of capital) and a time stop exit (exit after 21 days). I used the NASDAQ 100 index (NDX) in place of the crude oil futures. The assumption is that since the stocks on the list are all in the NDX index, that they would generally be correlated to the index. The author’s entry rule filters out those that have a negative correlation to the index. Note that I changed the minimum correlation from a -0.4 to 0.0. Also I found that increasing the minimum divergence from 20 to 2000 increased the Sharp ratio and decreased the maximum draw down without affecting the annualized return.

Figure 1 shows the equity curve versus the NASDAQ 100 index for the period 1/5/2000 to 10/14/2015. Figure 2 shows the metrics for this same test period. The system clearly outperformed the index.

Captions:
Figure 1 - Equity curve of the modified divergence system versus the NASDAQ 100 index for the period 1/5/2000 to 10/14/2015.

Figure 2 – Metrics for the modified system and the test settings.


EDS Code:
LOONIE.EDS
(right click and choose Save As)


 

Traders Studio Version :

Original article by Markos Katsanos
Traders Studio Code by Richard Denning

The following code files are contained in the download from the websites:

  • Function DIVERG – computes the divergence indicator for the tradable and a another security, index or future
  • Indicator plot DIVERG_IND – for plotting the DIVERG on a chart

Figure 1 shows the DIVERG indicator on a chart of the Apple Inc.

Captions:
Figure 1 – DIVERG indicator on a chart of the Apple Inc.

Traders Studio Code:
Loonie.zip
(right click and choose Save As)

 

 

 

 

 

 

 

 

 

 

 

 

 

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